Dear Clients, Colleagues, and Friends,
As we approach the end of 2025, we want to take this opportunity to thank you for your continued trust in our practice. Elder law and estate planning are deeply personal areas of practice, and it is a privilege to help individuals and families navigate important decisions that protect independence, dignity, and legacy.
This year has brought significant changes to estate planning and elder law, particularly affecting New York State residents. We're committed to keeping you informed about developments that may impact you and your loved ones.
CRITICAL MEDICAID AND ELDER LAW UPDATES
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law, which included several provisions that directly impact Medicaid planning and long-term care access for New Yorkers. These changes make early planning more important than ever.
Home Equity Limits Being Capped
Beginning January 1, 2028, Medicaid will impose a firm $1,000,000 cap on home equity for long-term care eligibility, with no future inflation adjustments. Currently, the New York home equity limit is $1,097,000 and in 2026, New York will allow a home equity of up to $1,130,000. This change of capping the home equity will make it more difficult for individuals with substantial home equity to qualify for Medicaid long-term care benefits unless specific exceptions apply (such as having a spouse or disabled child living in the home).
Action Item: If you have significant home equity and anticipate needing long-term care in the future, now is the time to explore planning strategies such as irrevocable trusts or other asset protection techniques. Remember that Medicaid has a five-year look-back period for asset transfers, so planning well in advance is essential.
Home and Community-Based Services Restrictions
The new law imposes "budget neutral" requirements on the waivers states use to provide home and community-based services. For New Yorkers, this could lead to reduced availability of services that help seniors remain in their homes rather than entering nursing homes. Programs such as the Managed Long-Term Care (MLTC) and Consumer Directed Personal Assistance Program (CDPAP) may face increased scrutiny and potential limitations.
New York-Specific Home Care Changes
In addition to federal changes, New York State implemented new minimum needs requirements for certain Medicaid-covered home-care services starting September 1, 2025. Applicants for Personal Care Services (PCS), Consumer Directed Personal Assistance Program (CDPAP), and Managed Long-Term Care (MLTC) are now assessed under updated functional need standards, focusing more closely on Activities of Daily Living (ADLs) such as bathing, dressing, walking, and using the bathroom. If you were already authorized for these services before September 1, 2025, you are generally grandfathered under the old rules unless your coverage lapses.
Eligibility Re-determinations
After December 31, 2026, Medicaid eligibility re-determinations will occur every six months instead of annually, requiring more frequent documentation and oversight. This means New York Medicaid recipients will need to maintain careful records and be prepared to provide updated financial information twice per year.
Reduced Retroactive Coverage
The law reduces retroactive Medicaid coverage from three months to two months for applications made after December 31, 2026. This makes timely application even more critical, particularly for New Yorkers who may be facing unexpected nursing home costs.
Nursing Home Reimbursement Challenges
Changes to how nursing homes are reimbursed under Medicaid could lead to financial pressures on New York facilities, potentially resulting in closures, reduced services, or increased private-pay costs. The law also includes a 10-year moratorium on implementing national minimum staffing standards for nursing homes. Given New York's already high cost of long-term care, these changes may significantly impact the availability and quality of nursing home care in our state.
Community Spouse Resource Allowance (CSRA)
On a positive note, the maximum Community Spouse Resource Allowance will increase to $162,660 (up from $157,920 in 2025). This is the amount of assets a healthy spouse can retain when their partner receives Medicaid long-term care benefits. The minimum monthly maintenance needs allowance will increase in 2026, and in New York, where the maximum monthly maintenance needs allowance is utilized, healthy spouses can keep $4,066.50 of income per month (up from $3,948 per month in 2025). These increases provide some additional financial protection for community spouses in New York.
Understanding New York’s Medicaid Look-Back Rules
It’s important to remember that New York Medicaid continues to enforce a five-year look-back period for institutional (nursing home) care. Transfers or gifts made for less than fair market value within five years of applying for nursing home Medicaid can result in a penalty period of ineligibility. While legislation has authorized a 30-month look-back period for community (home care) Medicaid, its implementation remains uncertain at this time. Given these distinctions—and the potential for future changes—advance planning remains essential, particularly for individuals seeking to preserve assets while maintaining eligibility options.
MAJOR ESTATE TAX CHANGES: THE ONE BIG BEAUTIFUL BILL ACT
The OBBBA also brought substantial changes to estate and gift tax planning. This legislation provides rare clarity in an area that has been marked by uncertainty in recent years.
Key Estate Tax Provisions
Federal Estate and Gift Tax Exemption Increase
The federal estate, gift, and generation-skipping transfer (GST) tax exemption has been increased to $15 million per individual ($30 million per married couple), effective January 1, 2026. This represents an increase from the current 2025 exemption of $13.99 million per person. Importantly, this new exemption amount is permanent and will continue to be adjusted for inflation in future years.
What This Means
The long-standing uncertainty surrounding the potential expiration of higher federal exemptions (the “sunset”) at the end of 2025 has now been resolved, providing greater clarity for long-term planning. Families with substantial estates have increased flexibility when structuring wealth transfer strategies, though thoughtful and strategic planning remains essential to fully maximize available tax benefits. Even with higher exemption levels, time continues to be one of the most powerful planning tools—making transfers sooner allows future appreciation to occur outside of a taxable estate.
Critical New York State Estate Tax Considerations
While federal exemptions have increased, New York State maintains its own estate tax with a significantly lower threshold. Currently, New York's estate tax exemption is $7.16 million per person, to increase to $7.35 million per person in 2026. It remains unclear whether New York will increase its exemption to match the new federal amount. This means that even with the higher federal exemption, many New York residents will still face state estate tax exposure.
Important: New York has a unique "cliff" provision where estates valued between 100% and 105% of the exemption amount face a phase-out of the exemption. For estates exceeding 105% of the exemption amount (about $7.7 million in 2026), no exemption is available at all, and the entire estate is subject to New York estate tax from the first dollar. This makes careful planning essential for New York residents with estates approaching or exceeding $7 million.
Annual Exclusion Gifts: Important Limitations
For 2025, individuals can gift up to $19,000 per recipient ($38,000 for married couples) to as many people as they wish without using any lifetime exemption or filing a gift tax return. It appears that this amount will remain the same for 2026.
CRITICAL WARNING: Annual exclusion gifting may not be appropriate for everyone:
- If your estate is well below the federal and New York exemption thresholds (under $7 million for individuals, under $14 million for couples), annual exclusion gifting provides no estate tax benefit and may be unnecessary.
- Annual exclusion gifts can trigger Medicaid penalties. Any gifts made within five years of applying for Medicaid long-term care benefits will result in a period of ineligibility. For example, a gift of $19,000 could result in more than one month of ineligibility based on current New York Medicaid rules. If you anticipate needing long-term care within the next five years, gifting could jeopardize your Medicaid eligibility.
Bottom Line: Estate tax planning and Medicaid planning often have conflicting goals. Making gifts to reduce estate taxes can create Medicaid ineligibility. Always consult with an attorney who understands both areas before making any substantial gifts.
WHY PLANNING MATTERS NOW MORE THAN EVER
While the increased federal exemptions may lead some to believe estate planning is no longer necessary, nothing could be further from the truth—especially for New York residents. Here's why thoughtful planning remains essential:
- New York State Estate Tax: With a $7.35 million exemption in 2026 and harsh cliff provisions, New York estate tax planning remains critical for many families, regardless of the higher federal exemption.
- Medicaid Planning Urgency: The new home equity cap and service restrictions make advance Medicaid planning crucial. The five-year look-back period means you need to plan today for potential care needs years from now.
- Protection Beyond Taxes: Estate planning ensures your wishes are honored, protects vulnerable family members, avoids probate delays, and provides for smooth business succession.
- Long-Term Care Costs: New York has some of the highest long-term care costs in the nation. Proper planning is essential to protect your assets while ensuring access to quality care.
- Balancing Competing Goals: Estate tax minimization and Medicaid eligibility often require different strategies. Professional guidance can help you navigate these competing priorities.
RECOMMENDED ACTIONS FOR YEAR-END
As 2025 comes to a close, you should consider the following action items:
- Review Your Existing Estate Plan: Ensure your documents reflect current New York and federal law, your wishes, and your family situation. If your plan was created before recent changes, it likely needs updating.
- Evaluate Your Estate Tax Exposure: If your estate approaches $7 million, consult with an attorney about strategies to minimize New York estate tax, such as lifetime gifts, trusts, or charitable planning.
- Start Medicaid Planning Early: Don't wait until care is imminent. With the five-year look-back period for nursing home care and possibility of implementation of the lookback for home care services, along with the new restrictions taking effect in 2028, now is the time to explore irrevocable trusts and other asset protection strategies.
- Be Cautious About Gifting: Before making any gifts—even annual exclusion gifts—consider whether you might need Medicaid within the next five years. A seemingly harmless gift today could cost you eligibility when you need it most.
- Update Beneficiary Designations: Review beneficiaries on retirement accounts, life insurance policies, and bank accounts to ensure they align with your overall plan.
- Document Your ADLs: If you may need home care services, work with your doctor to ensure your functional limitations are clearly documented in your medical records.
LOOKING AHEAD TO 2026
The estate planning and elder law landscape continues to evolve, particularly for New Yorkers who must navigate both state and federal regulations. While we now have greater certainty regarding federal estate tax exemptions, several critical questions remain: Will New York increase its estate tax exemption to match the federal amount? How will the state implement the new Medicaid restrictions? What impact will reduced federal funding have on New York's long-term care system?
We're monitoring these developments closely and will keep you informed as answers emerge. In the meantime, we encourage you not to delay in addressing your planning needs. The combination of New York's unique tax structure, impending Medicaid restrictions, and the five-year look-back period creates both challenges and opportunities that require prompt attention.
OUR COMMITMENT TO YOU
As we close out 2025, we extend our sincere thanks to our clients, their families, and our professional colleagues for your continued confidence and collaboration.
Whether you're creating your first estate plan, updating existing documents, navigating Medicaid eligibility, or planning for long-term care, we're here to help you protect what matters most. Please reach out to us to schedule a review or for anything else that we can assist you with.
Wishing you and your loved ones a healthy, peaceful, and prosperous New Year.
Warm regards,
Esther Zelmanovitz
DISCLAIMER: This newsletter is provided for informational purposes only and does not constitute legal advice. Estate planning and elder law are complex areas, and the information provided here is general in nature. Every situation is unique, and you should consult with an attorney about your specific circumstances. The information in this newsletter is current as of December 2025 and is subject to change. This newsletter is directed primarily to New York State residents and reflects New York law and practice.
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